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Weekly Economic Wrap: Mood Down; Spending Weak

by Dennis Jacobe, Chief Economist

Consumer spending remains 38% below a year ago

PRINCETON, NJ -- Consumers' mood dropped slightly last week as stocks faltered and gas prices at the pump continued to escalate. At the same time, job loss continues to exceed job creation, signaling further weakness in the job market. And, while consumer spending inched up last week, it remains 38% below a year ago.

1. Gallup Daily: Economic Conditions

Consumers' mood worsened slightly last week, with the percentage of Americans rating the economy "poor" increasing to 49% from 47% the prior week. Last week's percentage is worse than that of a month ago and is the worst such rating since the week ending April 26.

Although the percentage of Americans rating the economy "poor" increased, the percentage rating it "excellent" or "good" was unchanged last week at 10%. This is the same as a month ago but is down from the 16% of the same week a year ago.

2. Gallup Daily: Economic Outlook

Consumers' expectations for the economy's direction also deteriorated somewhat last week, as the percentage of Americans saying economic conditions are "getting worse" increased to 60% from 56% the prior week. Last week's percentage reflects a weakening of expectations compared to a month ago (57%) and is also the worst such rating since the week ending April 26. However, expectations remain much better than a year ago, when 87% said things were "getting worse."

The percentage of Americans saying the economy is "getting better" fell to 34% last week from 38% the prior week. While this is not as good as the percentage of a month ago (36%), it remains far better than the 8% of the same week a year ago.

3. Gallup Daily: Job Market

Job creation remained anemic last week, as the percentage of employees saying their companies were hiring was level at 23%. This is the same level of job creation as a month ago and far below the 38% of the same week a year ago.

Twenty-six percent of employees said their employers let people go last week -- essentially the same as the 25% of the prior week and equal to the 26% of a month ago. The pattern continues of more employers letting employees go than hiring (26% versus 23%, respectively) and this stands in sharp contrast to the job-market situation of the same week a year ago, when just the reverse was the case (38% hiring versus 15% letting go).

4. Gallup Daily: Consumer Spending

Americans reported spending an average of $64 per day in stores, restaurants, gas stations, and online last week. This is slightly better than the $58 of the prior week but down 12% from a month ago and down 38% from a year ago. The continuing gap between what consumers reported spending last year and what they report spending at the same time this year suggests that Americans may be settling into a pattern in which curtailed spending is the "new normal." (Gallup's spending data are based on Americans' self-reports of the total amount of money they spent the prior day on purchases other than a home, a motor vehicle, or their normal monthly bills.)

Commentary

Even as the consumer mood surged over the past few months, consumer spending did not improve. Over the past several weeks, consumer perceptions have leveled off. Last week, there appears to have been a slight deterioration in the way consumers were seeing the economy; more importantly, there was no improvement. Still, while consumer spending remains far below year-ago levels, it has not fallen further behind at this point.

Gallup's job-market modeling suggests that the unemployment rate is continuing to increase. And on Monday, the stock market fell 200 points. If jobs remain hard to get and the market continues to decline, the consumer mood could decline further. If this happens, it could represent a significant test of consumer spending this summer. Since consumer spending seemed unaffected by a sharp surge in consumer optimism earlier this year, it may be that a downturn in such optimism may not affect spending, either. On the other hand, if spending deteriorates further with the consumer mood, then many of the nation's retailers and small businesses may need to rethink the "new normal" for spending during back-to-school.

Survey Methods

For Gallup Poll Daily tracking, Gallup interviews approximately 1,000 national adults, aged 18 and older, each day. The Gallup consumer perceptions of the economy and consumer spending results are based on random half-samples of approximately 500 national adults, aged 18 and older, each day. The Gallup job creation and job loss results are based on a random half sample of approximately 250 current full- and part-time employees each day. For the total samples of these surveys, one can say with 95% confidence that the maximum margin of sampling error is ±3 percentage points.

Interviews are conducted with respondents on land-line telephones (for respondents with a land-line telephone) and cellular phones (for respondents who are cell-phone only).

In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

Slightly more Americans agree (52%) than disagree (45%) that the federal government is responsible for making sure all Americans have healthcare coverage. This balance of views is similar to last year.

Americans' daily self-reports of spending averaged $98 in November, up from $93 in October. The latest figure is the highest average recorded for the month of November since Gallup began tracking consumer spending in 2008.